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This book underlines the essential role of law in growth economics. The authors, however, remind us that both subjects diverged in the 20th century only to be reunited during its last quarter thanks to a powerful scholarly movement.The authors, Cooter and Schafer, skillfully avoid economics verbiage and complicated legal terms, providing instead a plethora of anecdotes, appropriate examples and studies. Specialists and general readers will discover how law and economics deal specifically with the challenges of growth.Growth is the motor of the economy. A mere 2 percent annual growth increases wealth more than seven times and a 10 percent annual growth (which has been approximately China’s growth rate during the last 30 years) increases wealth 14 thousand times.Business ventures boost a country’s growth that needs to be sustained by the appropriate legal rules and institutions. With numerous examples, the authors explain “how insecure property, unenforceable contracts, uncollectable debts, financial chicanery and other legal problems stifle business ventures and cause national poverty”.One example features a family in Ecuador, owner of a thriving shrimp farm in the coastal mangrove swamps on the gulf of Guayaquil. To grow in the 1990s, the business needs more capital, either from a loan or selling stock. But if the family sells stock, investors receive dividends when shrimp prices rise, and nothing when shrimp prices fall. The small size of the Ecuadorian stock market precludes selling stock, and the family regards a loan as too risky, so it foregoes outside finance and grows more slowly.“A stock market cannot flourish unless corporate and securities laws effectively protect noncontrolling investors”.India is a case in point. When India gained its independence, it established a state-led-economy and public law gradually replaced private law. By 1980, India enjoyed the presence of independent court as well as good written laws of property and contracts. After 1980 India distanced itself with state planning and initiated small steps toward privatization, deregulation and free trade. As the state took away its economic controls, private property and freedom of contract strengthened. The country enjoyed high growth rates for more than 20 years. “The pattern of events suggests that countries surged ahead where improved laws effectively supported innovative business ventures and countries lagged where law failed to provide this support” say the authors who also, justly remark that writing down a law does not make it effective. If written laws are less effective in India, Nigeria, and Peru than in England or Spain, it is because a law ultimately draws its effectiveness from society and the state.Effective laws such as property laws, are indeed necessary to reassure people can keep what they make. The world almost lost one of its greatest theatrical legacy because Shakespeare only wrote a few copies of every play he wrote. He refused to publish his plays to prevent others performing them. Due to the absence of effective copyright laws, he made money from selling tickets to performances of his plays and not from publications.J.K. Rowling, on the contrary, sold 8.3 million copies of Harry Potter and the deathly hallows on the first day of its publication. Rowling reaped the benefits of an effective copyright to secure the ownership of her literary creation.In countries like China and Brazil where people can copy freely, savvy businessmen endorse other people’s creations and thus bypass the costs of creating such as research and development costs. However, if copying slows creativity, patents and copyright boosts creativity. Ideas need capital to produce growth and business requires freedom through law. The authors therefore conclude that the state’s first role in economic development is to build the legal foundations for markets. With the legal foundations in place, liberalization will promote innovation. Enacting laws however is not enough. Laws and social norms must braid into institutions that strengthen each other like the strands in a rope. Trust develops from a history of cooperation and fair competition. By solving trust problems, law provides the framework for economic innovation to tend the poverty of nations.

What's happening around Saudi Arabia

ALKHOBAR: A power failure at the King Fahd Causeway on Wednesday night resulted in a massive traffic congestion, even as officials failed to explain the cause of the snag, local media reported.A power outage for 74 minutes on the link between the Kin...

JEDDAH: A female Saudi lawyer was able to get a stay order on a ruling by the general court in Jeddah that awarded custody of a two-year-old girl to her father. She successfully argued to get the court order reversed that gave custody back to the mot...

JEDDAH: The Commission for the Promotion of Virtue and the Prevention of Vice (Haia) said that combating harassment cases is part of its responsibility to promote Islamic values and morals in society.“Those harassing women will be brought to book,” s...

JEDDAH: More than 26 million Umrah pilgrims and worshippers visited the Grand Mosque during the month of Ramadan and in the first few days after Eid Al-Fitr, thanks to a smooth transport arrangement under the guidance of Makkah Gov. Prince Khaled Al-...

AL-AHSA: An outbreak of lumpy skin disease (LSD) has been discovered in cattle in Al-Ahsa which is an area with many cows. All necessary measures have been taken to protect the livestock, said Mahmoud Al-Shuaibi of the Agriculture Department in Al-Ah...

RIYADH: An architectural masterpiece — the King Abdul Aziz Historical Center (KAHC) — in Riyadh is a huge complex dedicated solely to collecting, preserving, promoting and showcasing the history and heritage of Saudi Arabia. The KAHC is a three milli...

RIYADH: The Saudi Blind Society (Kafif) has made all preparations for the three-day workshop for the blind to be held here next week and attended by delegates from various Asian countries.Mohammed bin Suleiman Al-Shuwaiman, Kafif director general, th...

JEDDAH: The number of Saudis who took early retirement schemes last year stood at 38,647, the General Organization for Social Insurance (GOSI) has said. The Eastern Provinces got the lion's share of disbursements for retirees, amounting to SR3.8 bill...

JEDDAH: Meat and poultry topped the list of food items seized by the Saudi Food and Drug Authority (SFDA) at the border crossings for violating the health standards in the last two months.Approximately 267,137 kg of unfit meat and poultry were reject...

JEDDAH: Many sponsors and workers of small companies are struggling to get a comparatively cheaper health cover for renewal of iqama (residential permit) as the insurance companies have stopped issuing the same.The passport department has made it com...

RIYADH: Police have detained 11 Indonesian nationals, who arrived in the holy city of Makkah for Umrah a few days back.The Indonesian Religious Affairs Ministry is working closely with the Indonesian Consulate in Jeddah to assist the group of citizen...

JEDDAH: The National Committee for Bakeries at the Council of Saudi Chambers (CSC) said this Haj season would see no shortage in supplies of bakery items.The committee said there was need to increase operational labor by about 20 percent.It confirmed...

LONDON: Members of Osama Bin Laden’s family were among four people who died when a private jet crashed in Britain, Saudi Arabia’s embassy in London said on Saturday.The Saudi-registered plane plowed into a car auction site and burst into flames in so...

JEDDAH: Maj. Gen. Ibrahim Al Hamzi, director general of prisons, has sacked Brig. Ahmad Al Shahrani, director of Jeddah prisons, after the case of a video clip about prisoners taking heroin went viral, according to local media.Quoting informed source...